XPEL, Inc.
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss. 3.2 and 3.3 -- National Instrument 51-102 Continuous Disclosure Obligations, s. 1.1, definition of "MD&A". An issuer that is not yet an 'SEC issuer' wants to file financial statements prepared in accordance with U.S. GAAP and audited in accordance with U.S. GAAS. The issuer intends to become an SEC registrant. The issuer has filed a registration statement with the SEC; the issuer will meet all the elements of the definition of 'SEC issuer' once the SEC accepts its registration statement; the issuer will file financial statements and MD&A that comply with the requirements for SEC issuers in NI 52-107 and NI 51-102; if the issuer does not become an SEC issuer by a set date, it will re-file its financial statements in accordance with Canadian GAAP and Canadian GAAS and its MD&A in the Canadian form. The decision and application are also held in confidence by the decision makers until the earlier date of the Issuer making certain filings, waiving confidentiality, or 14 days from the date of the decision.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.1.
National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.
March 28, 2019
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
XPEL, INC.
(the Filer)
DECISION
Background
1 The securities regulatory authority in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirement in section 3.2 and 3.3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements, other than acquisition statements, be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and, if applicable, audited in accordance with Canadian GAAS (the Canadian Accounting and Auditing Requirements) , and exempting the Filer from the requirement in section 1.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (in the definition of MD&A) that management's discussion and analysis be prepared in accordance with the form of 51-102F1 with respect to the financial statements for the year ended December 31, 2018 and the interim period ended March 31, 2019, and the management's discussion and analysis prepared for those periods (the Canadian MD&A Form Requirements) (collectively, the Exemptions Sought).
The Decision Maker has also received a request from the Filer for a decision that the Application and this decision (together, the Confidential Material) be kept confidential and not be made public until the earliest of (i) the date on which the Filer has completed each of the following: (A) publicly files the Form 10 (as defined below); (B) files the Financial Statements (as defined below) on SEDAR; and (C) issues a news release announcing receipt of the Exemptions Sought, the public filing of the Form 10 and the filing of the Financial Statements, (ii) the date on which the Filer advise the Decision Maker that there is no longer any need for the Confidential Material to remain confidential, and (iii) the date that is 14 days after the date of this decision (together, the Confidentiality Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta and Manitoba.
Interpretation
2 Terms defined in National Instrument 14-101 Definitions, NI 52-107, NI 51-102 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
3 This decision is based on the following facts represented by the Filer:
1. the Filer is a company incorporated under the laws of the State of Nevada, USA;
2. the Filer's head office is located at 618 W. Sunset Road, San Antonio, Texas, United States of America, 78216;
3. the Filer's registered office is 2905 Lake East Drive, Suite 150, Las Vegas, NV, 89117;
4. the principal business of the Filer is the manufacturing, selling, distribution and installation of after-market automotive products, including automotive paint protection film, headlight protection film, automotive window films and other related products;
5. the Filer is a reporting issuer in British Columbia, Alberta, Manitoba and Ontario and is not in default of securities legislation in any jurisdiction;
6. the common shares of the Filer are listed on the TSX Venture Exchange Inc. under the symbol "DAP.U";
7. the Filer's financial year end is December 31;
8. all of the executive officers and the directors of the Filer are resident in the United States; no directors or officers are resident in Canada;
9. the majority of the consolidated assets of the Filer are located in the United States;
10. the business of the Filer is administered principally in the United States;
11. the majority of the Filer's outstanding voting securities are directly or beneficially held by residents of the United States or countries other than Canada;
12. the Filer has filed a draft registration statement on Form 10 (the Form 10) with the U.S. Securities and Exchange Commission (the SEC) on a confidential basis on March 12, 2019;
13. the Filer has included in the Form 10, audited financial statements for the fiscal years ended December 31, 2017 and December 31, 2018 prepared in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS (the Financial Statements);
14. the Filer filed the Form 10 with the SEC in order to register its common shares under the Securities Exchange Act of 1934 (the 1934 Act) and intends to list its common shares on the Nasdaq Capital Market, and upon the effectiveness of the Form 10, will become subject to the periodic reporting requirements to file reports with the SEC under the 1934 Act;
15. in the event that the Exemptions Sought are granted, the Filer shall (i) file the Form 10 publicly with the SEC; (ii) immediately thereafter file the Financial Statements on SEDAR; and (iii) immediately thereafter issue a news release announcing receipt of the Exemptions Sought, the filing of the Form 10 with the SEC and the filing of the Financial Statements, as soon as possible, but in any event not later than 14 days after the date the Exemptions Sought are granted;
16. the Filer anticipates that it will become an SEC Issuer as defined in NI 52-107 within 60 days of the date of filing the Form 10;
17. upon becoming an SEC Issuer, the Filer may: (i) under Part 3.7 of NI 52-107, prepare its financial statements, other than acquisitions statements, in accordance with U.S. GAAP, (ii) under Part 1.1 of NI 51-102, prepare its management's discussion and analysis in accordance with Item 303 of Regulation S-K under the 1934 Act, and (iii) under Part 3.8 of NI 52-107, the Filer's financial statements may be audited in accordance with U.S. PCAOB GAAS;
18. the Exemption Sought will eliminate the need to also prepare financial statements for the year ended December 31, 2018 and the interim period ended March 31, 2019 in accordance with Canadian GAAP applicable to publicly accountable enterprises;
19. if the Filer does not become an SEC Issuer by June 30, 2019, the Filer will immediately re-file on SEDAR all previously filed financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2018 and the interim period ended March 31, 2019 and related management's discussion and analysis; the re-filed financial statements will be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS; the management's discussion and analysis will be amended to reflect the re-filed financial statements and will be re-filed in the Canadian MD&A Form; and the Filer will issue a news release upon re-filing the financial statements that explains the nature and purpose of the re-filings; and
20. the Filer will comply with the requirement of subsection 4.3(4) of NI 51-102 by filing the restated interim financial statements for each of the interim periods in fiscal 2018 in accordance with U.S. GAAP, concurrent with, or shortly following, the filing of its annual financial statements for the year ended December 31, 2018, but in any event no later than April 30, 2019.
Decision
4 The Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemptions Sought are granted provided that:
(a) the Filer files:
(i) financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2018 and the interim period ending March 31, 2019 and, if applicable, audited in accordance with U.S. PCAOB GAAS;
(ii) the related management's discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act for these periods; and
(b) if the Filer does not become an SEC Issuer by June 30, 2019 the Filer will immediately re-file on SEDAR:
(i) the financial statements for the year ended December 31, 2018 and the interim period ending March 31, 2019, prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, as applicable;
(ii) the related management's discussion and analysis in the Canadian MD&A Form; and
(iii) a news release explaining the nature and purpose of the re-filings.
The further decision of the Decision Maker is that the Confidentiality Relief is granted.
As to the Exemption Sought from the Canadian Accounting and Auditing Requirements and the Confidentiality Relief:
"Cameron McInnis"Chief AccountantOntario Securities Commission
As to the Exemption Sought from the Canadian MD&A Form Requirements and the Confidentiality Relief:
"Marie-France Bourret"Acting Manager, Corporate FinanceOntario Securities Commission